limitation of liability clause
A contractual provision that caps the amount of liability one party to the
contract may have to the other party. Frequently used to equalize the imbalance
between the potentially enormous risks assumed in performing a contract, as
related to the relatively small profit or fee received for that performance.
Design contracts, for example, commonly include a limitation of liability clause
that limits the architect's or engineer's liability for design flaws to the
amount of its fee for work performed under the contract. Note that these provisions
only apply to the liability of one contracting party to the other. They do not
limit liability with respect to others who are not subject to the contract.
When drafted appropriately, these clauses are largely enforceable.
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